Pakistan has been hit with massive losses to its GDP worth $38 billion because of the Financial Action Task Force’s (FATF) decision to retain the country on its grey list since 2008, according to a research paper published by the Islamabad-based independent think-tank, Tabadlab.
The paper titled, “Bearing the cost of global politics — the impact of FATF grey-listing on Pakistan’s economy“, has been authored by Naafey Sardar.
This comes against the backdrop of a fresh greylisting tag for Pakistan.
Pakistan was retained on the grey list, or list of countries under “increased monitoring”, as the Paris-based UN watchdog judged it deficient in prosecuting the top leadership of UN Security Council-designated terror groups.
The list includes Lashkar-e-Taiba, Jaish-e Mohammad, Al Qaeda and the Taliban.
As per the paper, results suggest that FATF grey-listing, starting in 2008 and till 2019, may have resulted in cumulative real GDP losses of approximately $38 billion.
Moreover, estimates indicate that a large proportion of this response (58 per cent) was driven by the reduction in consumption expenditures (both household and government).
Exports and inward foreign direct investment are also partially responsible for this decline in GDP, with associated cumulative losses of $4.5 billion and $3.6 billion respectively. These results point to the significant negative consequences associated with FATF grey-listing.
The estimates from this paper point to the significant negative implications of FATF’s grey listing for Pakistan, thus emphasizing the need for policymakers to comply with the FATF on the adoption of AML/CFT legislation to avoid future economic losses, it argued.
With the FATF’s latest action, Pakistan, even after ‘largely completing’ 26 of the 27 targets, will remain in the grey list for at least another year and deliver on seven new parallel action points to address deficiencies in its Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) regime, The Dawn said in a report.
The watchdog said in a statement that since June 2018, when Pakistan made a high-level political commitment to work with the FATF and APG to strengthen its AML/CFT regime and to address its strategic counter terrorist financing-related deficiencies, the country’s continued political commitment has led to significant progress across a comprehensive CFT action plan.
The FATF recognizes Pakistan’s progress and efforts to address these CFT action plan items and notes that since February 2021, Islamabad has made progress to complete two of the three remaining action items on demonstrating that effective, proportionate and dissuasive sanctions are imposed for TF convictions and that the country’s targeted financial sanctions regime was being used effectively to targeted terrorist assets.
Pakistan has now completed 26 of the 27 action items in its 2018 action plan.
“The FATF encourages Pakistan to continue to make progress to address as soon as possible the one remaining CFT-related item by demonstrating that TF investigations and prosecutions target senior leaders and commanders of UN designated terrorist groups.”
Jurisdictions under increased monitoring are actively working with the FATF to address strategic deficiencies in their regimes to counter money laundering, terrorist financing, and proliferation financing.
In October 2020, the FATF decided to recommence work, paused due to the Covid-19 pandemic, and to identify new countries with strategic AML/CFT deficiencies and prioritize the review of listed countries with expired or expiring deadlines of action plan items.
Albania, Barbados, Botswana, Cambodia, Cayman Islands, Ghana, Jamaica, Mauritius, Morocco, Myanmar, Nicaragua, Pakistan, Panama, Uganda, and Zimbabwe have had their progress reviewed by the FATF since February 2021.
Following review, the FATF now also identifies Haiti, Malta, the Philippines, and South Sudan.